WASHINGTON (Reuters) - A top U.S. banking regulator who bought financial stocks in the months before he became a regulator for the industry told lawmakers on Thursday that those investments were allowable and proper.

Joseph Otting is prohibited from buying U.S. bank stocks as the Comptroller of the Currency but the former banker did invest in the sector in the months between his nomination and swearing-in.

Speaking before the Senate Banking Committee, Otting said he had sold off his financial investments and that ethics officials had never told him to stop investing ahead of taking office.

"I was in constant communication with the Treasury Department ethics department through this entire process," Otting told the panel.

"No one had ever at any point in time told me that it was improper or illegal."

Reuters reported the trades in April, based on financial disclosure documents filed with the Office of Government Ethics. Experts in U.S. government ethics standards told Reuters at the time that the trading activity, while not illegal, could have violated the spirit of rules designed to prevent conflicts of interest.

Sherrod Brown, the top Democrat on the banking panel, said Otting had damaged the public's trust by buying more stocks in a sector that he was about to regulate.

"I don't question your integrity here but maybe your judgement," said Brown. "You buy stocks after you get appointed to a job like this?"

Otting, who was formally nominated in June 2017 and took office in November, said he had no knowledge of the specific trades because they were handled by his broker.

He added that due to the length of the nomination selection process, which began in February 2017, he would have had to forego 10 months of investment opportunities had his broker halted trading.

"I'm just flabbergasted," said Brown, who said nominees should immediately cut their ties to industries that they hope to regulate once they began the nomination process.

(Reporting By Patrick Rucker and Michelle Price in Washington; Editing by Meredith Mazzilli)

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